Financial Intelligence Unit India

Overview

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Overview of Financial Intelligence Unit

The Financial Intelligence Unit India (FIU-IND) is a national agency established by the Central Government on November 18, 2004. Its main objective is to scrutinize suspected financial transactions and combat money laundering offenses under the Prevention of Money Laundering Act 2022. As an independent and autonomous agency under the Ministry of Finance, the FIU-IND reports directly to the Economic Intelligence Council (EIC) headed by the Finance Minister of India.

Functions of Financial Intelligence Unit India

The FIU-IND carries out the following functions:

Collection of Information: It collects various reports including cash transaction reports, financial transactions by non-profit organizations, international wire transfers, purchase of immovable properties, and suspicious transaction reports (STR) from reporting entities.
Analysis of Information: The FIU-IND analyzes transactions occurring in India to identify potential money laundering activities.
Sharing of Information: Information collected is shared with national intelligence/law enforcement agencies, regulatory authorities, and foreign Financial Intelligence Units.
Central Repository: The FIU-IND acts as a central repository for financial transactions and reporting from entities such as RBI, banks, and other institutions.
Coordination with Agencies: The unit collaborates with regional, national, and international institutes to enhance the effectiveness in combating financial crimes.
Research and Development: The FIU-IND conducts research on money laundering, terrorist financing, and related areas.

Reporting Entities under Financial Intelligence Unit India

Reporting entities, as defined in Section 2(WA) of the Prevention of Money Laundering Act (PMLA Act) 2002, include companies engaged in banking activities, institutions dealing with financial activities of Chit Funds, and others. The reporting entities that need to register with the FIU-IND are:

Banking Companies
Financial Institutions
Intermediaries
Chit Fund Companies
Chit Fund Companies
Housing Finance Institutions
Non-Banking Financial Companies (NBFCs)

Verification of Identity by Reporting Authorities

Reporting entities are required to verify client identities through Customer Due Diligence (CDD) measures. The verification can be done through online/offline Aadhaar authentication, passport verification, or any other officially issued document by the Government of India. The verification process must comply with the rules and guidelines specified under the Prevention of Money Laundering Act.

Rule 9 of the Prevention of Money Laundering (Maintenance Of Records) Rules 2005 mandates reporting entities to conduct customer due diligence as per KYC verification requirements.
Rule 10 of the Prevention of Money Laundering (Maintenance of Records) Rules 2005 requires reporting entities to maintain physical and electronic records in accordance with the guidelines specified.

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Meaning of Suspicious Transaction under Financial Intelligence Unit India

In this section, we will explain the definition of a suspicious transaction as per the guidelines of the Financial Intelligence Unit of India (FIU-IND).

Definition of a suspicious transaction

A suspicious transaction refers to a transaction, which may involve cash or non-cash forms of payment, made to a person with or without good faith. To be classified as a suspicious transaction, the following criteria should be considered:

Reasonable grounds for suspicion that the transaction is an offense according to the schedule.
The complexity of the transaction, which could lead to an unsafe environment.
Lack of a legitimate purpose for the transaction.
Reasonable grounds to believe that the transaction could contribute to the financing of terrorism or other illicit activities..

Maintenance of Records under Financial Intelligence Unit India (FIU-IND)

In accordance with section 12(1) of the Prevention of Money Laundering Act, 2002, all reporting entities are required to maintain records of their clients' transactions. These records must be preserved for a period of five years from the date of the transaction, as stated in section 12(3) of the same act.

The Prevention of Money Laundering (Maintenance of Records) Rules, 2005, further outline the specific transactions that reporting entities must record:

Cash Transactions

Cash transactions exceeding Rs 10 lakh or equivalent foreign currency denomination.
Multiple interconnected cash transactions in a month that amount to more than Rs. 10 lakh. The total value of these transactions should be considered..
Cash transactions exceeding Rs 10 lakh received by Non-Governmental Organizations (NGOs), including foreign currency denominations.

Forged or Counterfeit Currency

Any cash transactions involving the use of forged or counterfeit currency notes or banknotes, or any forgery of valuable securities.

Cross-Border Wire Transfers

All cross-border wire transfers exceeding Rs. 5 lakhs or its equivalent in foreign currency, where either the origin or destination of the fund is in India.

Purchase or Sale of Immovable Property

Any purchase or sale of immovable property valued at Rs. 50 lakhs or more, registered by the reporting entity.

In addition to the transaction details, it is necessary to record the nature of the transaction in accordance with Rule 4 of the Prevention of Money Laundering (Maintenance of Records) Rules, 2005. The following information should be included in the record:

Nature of Transaction

Currency or amount of the transaction

Date of the transaction

Parties involved in the transaction

Reports to be submitted under Financial Intelligence Unit India

Under the Prevention of Money Laundering Act and its respective rules, various types of reports must be submitted to the Financial Intelligence Unit India (FIU-IND). The following reports are required:

Cash Transaction Report (CTR)
Suspicious Transaction Report (STR)
Counterfeit Currency Report (CCR)
Cross-Border Wire Transfer Report (CBWTR)
Report on the sale/purchase of immovable property

The table below displays the due dates and submission periods for these reports:

Sl.No Report Description Due Date
1 CTR Cash transactions of Rs. 10 lakh or more 15th day of the succeeding month

2 CCR Forged or counterfeit currency transactions 15th day of the succeeding month

3 NTR Transactions with receipts by Non-Profit Organizations (NPOs) exceeding Rs. 10 lakh or more 15th day of the succeeding month

4 CBWTR Cross-border wire transfers of Rs. 5 lakhs or more 15th day of the succeeding month

5 Immovable property Sale or purchase of immovable property valued at Rs. 50 lakh or more 15th day of the month succeeding the quarter

6 STR All suspicious transactions, whether in cash or not Not later than 7 working days after determining the transaction as suspicious

Sl.No	Report	Description	Due Date
1	CTR	Cash transactions of Rs. 10 lakh or more	15th day of the succeeding month
2	CCR	Forged or counterfeit currency transactions	15th day of the succeeding month
3	NTR	Transactions with receipts by Non-Profit Organizations (NPOs) exceeding Rs. 10 lakh or more	15th day of the succeeding month
4	CBWTR	Cross-border wire transfers of Rs. 5 lakhs or more	15th day of the succeeding month
5	Immovable property	Sale or purchase of immovable property valued at Rs. 50 lakh or more	15th day of the month succeeding the quarter
6	STR	All suspicious transactions, whether in cash or not	Not later than 7 working days after determining the transaction as suspicious

Documents Required for Registering as an Entity under Financial Intelligence Unit India

To register with the Financial Intelligence Unit India, the following documents are required for different types of entities:

Individual

One certified copy of an officially valid document containing identity and address details.
Any identification documents.
One recent photograph.
Additional documents related to the nature of business and financial status as required by the reporting entity.

Company

Certificate of Incorporation (COI)/MOA & AOA of the Company.
Resolution from the Board of Directors and Power of Attorney (POA) granted to managers, officers, or employees to transact on behalf of the company.
Officially valid document for managers, officers, or employees holding an attorney to transact on behalf of the company.

Partnership Firm

Registration Certificate.
Partnership Deed.
Officially valid document for the person holding an attorney to transact on behalf of the partnership firm.

Trust

Registration Certificate.
Trust Deed.
Officially valid document for the person holding an attorney to transact on behalf of the trust.

Unincorporated Business / Body of Individuals (UIB/BOI)

Resolution of the managing body of the association or body of individuals.
Power of Attorney (POA) granted to transact on behalf of the association or body of individuals.
Officially valid document for the person holding an attorney to transact on behalf of the association or body of individuals.
Additional information required by the reporting entity to establish the legal existence of the association or body of individuals.

Procedure of Registration under the Financial Intelligence Unit India (FIU-IND)

The registration process with the Financial Intelligence Unit India (FIU-IND) involves two entities: reporting entities and the principal officer. Below is a step-by-step procedure for registration:

Registration of Reporting Entity

File the application for registration with the FIU-IND as a reporting agency.
Submit the application along with the required documents.
Receive the certificate of registration after verification of the application.

Registration of Principal Officer

Complete the registration of the reporting entity before registering the principal officer.
File an application with the details of the principal officer.
Submit the application along with the necessary documents for scrutiny by the authority.
Obtain the certificate of registration once the authority is satisfied with the documentation.

FAQ

What is the Financial Intelligence Unit India (FIU-IND)?

FIU-IND is the central national agency responsible for receiving, processing, analyzing, and disseminating information related to the financing of illegal activities such as terrorism and money laundering in India.

Who is required to register with FIU-IND?

Reporting entities, such as banks, financial institutions, non-profit organizations (NPOs), and designated businesses and professions (DBPs) are required to register with FIU-IND.

What are the benefits of registering with FIU-IND?

Registering with FIU-IND allows reporting entities to comply with the legal requirements for reporting suspicious transactions and maintaining transaction records. It also enables authorities to identify and prevent illegal financial activities that could harm the economy.

What is the process of registration with FIU-IND?

The registration process involves filing an application and submitting the necessary documents to FIU-IND. Once the application is verified, a certificate of registration is issued.

What are the documents required for registration?

The required documents depend on the type of entity registering. Commonly required documents include certificates of incorporation/registration, authorizing resolutions, and identity/address proof of the principal officer.

Is there a fee for registration with FIU-IND?

No, there is no fee for registration with FIU-IND.

What is the role of a reporting entity in the registration process?

A reporting entity must file the application for registration on behalf of the entity and communicate with FIU-IND.

Who can be appointed as a principal officer for registration?

A principal officer is an individual authorized by the reporting entity to conduct transactions and fulfill reporting obligations under FIU-IND regulations. The principal officer for registration is typically a senior official of the reporting entity.

Can an individual register as a reporting entity with FIU-IND?

No, only organizations or entities can register as reporting entities with FIU-IND.

How long does the registration process with FIU-IND take?

The registration process may take up to 30 days from the date of submission of all documents and information required by FIU-IND.

What are the consequences of failing to register with FIU-IND?

Non-registration or failure to comply with reporting requirements can result in fines or imprisonment for individuals or entities.

Can a company register multiple principal officers with FIU-IND?

Yes, a company can register multiple principal officers with FIU-IND.

Can a trust register with FIU-IND?

Yes, trusts can register with FIU-IND.

Is there a requirement for foreign entities to register with FIU-IND?

Yes, foreign entities that conduct transactions in or with India are required to register with FIU-IND.

How frequently do registered reporting entities need to submit reports to FIU-IND?

Reporting entities must submit reports to FIU-IND as per the specified timelines mentioned under the FIU-IND guidelines.

What are the penalties for non-compliance with FIU-IND reporting requirements?

Non-compliance with FIU-IND reporting requirements can result in fines or imprisonment for individuals or entities.

Can a reporting entity update their registration details at any time?

Yes, reporting entities can update their registration details at any time by informing FIU-IND.

Can a reporting entity cancel their registration with FIU-IND?

Yes, a reporting entity can cancel its registration with FIU-IND by submitting a written request.

Is there a deadline for registration with FIU-IND?

Yes, reporting entities must register with FIU-IND within 30 days of the commencement of business activities.

Are there any training programs available for reporting entities regarding FIU-IND regulations and reporting obligations?

Yes, FIU-IND conducts various capacity-building programs and trainings for reporting entities to promote compliance with FIU-IND guidelines and regulations.

Our Blog

Overview
Functions of Financial Intelligence Unit India
Reporting Entities under Financial Intelligence Unit India
Verification of Identity by Reporting Authorities
Meaning of Suspicious Transaction under Financial
Intelligence Unit India
Maintenance of Records under Financial Intelligence Unit India (FIU-IND)
Reports to be submitted under Financial Intelligence Unit India
Documents Required for Registering as an Entity under Financial Intelligence Unit India
Procedure of Registration under the Financial Intelligence Unit India (FIU-IND)
FAQ
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